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JM Financial injects fresh capital into asset reconstruction arm
Photo Credit: VCCircle

JM Financial Asset Reconstruction Company Ltd has raised Rs 183.37 crore ($25.65 million) by allotting compulsory convertible debentures (CCDs) to its parent JM Financial Ltd.

JM Financial said in a stock-exchange filing it subscribed to 49.16 lakh CCDs, convertible into 4.9 crore shares, as part of a rights issue.

It didn’t say who else, if any, took part in the rights issue.

JM Financial owned a 59.25% stake in the ARC as of May, according to a company presentation. The Sekhsaria and Neotia families held a 20% stake in the company. State-run lenders Indian Overseas Bank, UCO Bank and Union Bank of India as well as Valiant Mauritius Partners FDI Ltd own the remaining stake.

Early August, VCCircle reported that the Mumbai-based asset reconstruction company is set to beef up its capital by Rs 200 crore ($28 million) via equity instruments or compulsorily convertible debentures by September end.             

The ARC subsidiary of veteran investment banker Nimesh Kampani-promoted JM Financial Ltd previously raised Rs 279 crore in the quarter through March 2018. It had assets under management (AUM), or outstanding security receipts, of Rs 14,191 crore at the end of June 2019.

Since October when the non-banking financial company (NBFC) crisis broke out, JMFARC already bought loans worth Rs 1,900 crore.

The fresh funds would help the company to increase its AUM by Rs 1,300 crore since ARCs typically buy non-performing assets from banks through the 85:15 model in which they pay 15% of the amount in cash and the remaining in the form of security receipts.

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